An error by HMRC has led to millions of pensioners being overcharged on their taxes, with the average overpayment amounting to £5 each. According to reports, approximately 8.7 million state pension recipients have been affected, resulting in a total of £43.5 million being incorrectly collected last year.
The mistake occurred because HMRC failed to account for the annual increase in the state pension under the triple lock system. In the 2025/26 tax year, the new full state pension rose to £230.25 per week, up from £221.20 in 2024/25. This meant that state pension income was recorded as £9.05 higher than it should have been, leading to an additional tax charge of £1.81 for basic-rate taxpayers, £3.62 for higher-rate taxpayers, and £4 for additional-rate taxpayers.
The error has impacted pensioners who pay income tax via self-assessment, as well as those still in employment who pay through Pay As You Earn (PAYE). The government has announced plans to roll out a fix later this summer.
An HMRC spokesperson apologised, stating: "We apologise to those affected by this error and are working at pace to fix the issue, although the impact is small with the difference in tax owed being around £5 in most cases."
Sir Mel Stride, commenting on the situation, said: "If HMRC have been charging millions of pensioners too much tax then questions need to be answered and the matter must be urgently put right. Ministers need to ascertain what has happened and what action is being taken to ensure these sorts of errors do not happen again."
Government guidance explains that if a pensioner exceeds their Personal Allowance, HMRC will send a Simple Assessment tax bill detailing the amount owed and how to pay it. After the first year of receiving the State Pension, tax is calculated based on 52 weeks of payments each year. If income is below the Personal Allowance, no tax is usually due.
For employed individuals, employers typically deduct any tax owed from earnings, including tax on pensions. Self-employed individuals must complete a Self Assessment tax return at the end of the tax year, declaring all income including the State Pension and private pensions. Other income not from an employer or pension must also be reported to HMRC, potentially requiring a Self Assessment tax return.
